Sometimes your business needs money fast. The question is, how do you get it when the traditional methods don’t work for you?
Let’s be honest, when it comes to funding, it’s never as straightforward as business advisors, lenders, backers, and investors might have you think. And, if you’re a small business, it’s unlikely you can afford to pay someone to do all the legal research and nit-picky stuff that the big boys can. You have to get your hands dirty.
We’ve collated a number of different stories to show you how you can go about getting funding to grow your business, or to launch a new venture.
How a now-famous web company got funded by Mark Cuban
Rob Biederman, co-founder of HourlyNerd, has a funding story that wouldn’t be out of place in a movie.
In case you haven’t heard of the website before, it allows you to register and hire professional consultants with top-tier qualifications, at a fraction of the cost you might otherwise have to pay, and in a fraction of the time. It’s really a lovely concept, and as expected the company has been featured in the Wall Street Journal, The New York Times, Harvard Business Review, and on and on.
But, before they were big names, they were simply a team that needed additional money urgently to pay their website development firm. They didn’t have the time to apply to appear on “Shark Tank,” and so took a shot in the dark. They emailed billionaire investor Mark Cuban, asking him for financing.
CEO Rob Biederman says, “Stunningly, within 15 minutes Cuban replied and said yes! After some back-and-forth, we received word that Mark would commit $450,000, far more than we could have expected. My heart kind of stopped, I was at the gym when I got the news. It was definitely the most exciting moment of my short business career.”
With that in mind, have you thought of taking a shot in the dark? Who could you contact that might be interested in your business, even if you think they’re totally out of your league? After all, what have you got to lose?
How a law firm got funded thanks to partners that wouldn’t give up
In 2003, Ben Luftman, fresh out of law school, started Luftman, Heck & Associates LLP, with partner Jeremy Heck.
Given that Ben and Jeremy were denied by many traditional banks they approached for funding, primarily because they’d entered the working world with $100k in debt and zero assets, they’ve got some sound advice to share on how they started a business and lived to tell the tale.
Before you start the hunt for funding, whether it is to help get you started or to help you grow, Ben recommends creating a business plan.
“Potential investors are looking to see how you will organize and structure your business. Having a business plan can be a tool to show people or institutions that may want to fund your business, but it can also be a way to work through the questions they might ask. Today, many people say the business plan is dead, but we think it’s a useful way to prepare yourself for entrepreneurship.”
As a business planning resource ourselves, we can’t help but agree. Thinking of a business plan as a formal, long, “stuffy” document is old-school, and we’ve heard time and time again from the likes of angel investors and venture capitalists that most people just don’t read the business plan. They may read your executive summary, but the whole plan? Forget it (try showing them your one-page pitch instead).
That said, laying out your plan for yourself, as Ben suggests, is a great way to work through some of the primary questions you may have, or to prep you for the types of questions investors and banks might ask, especially with regards to the financial section of the plan.
The next step in the process?
Ben says, “Don’t get discouraged.” When they started, they had nothing. In fact, they had less than nothing, being already backed up with debt. But they didn’t let this stop them.
After realizing the “traditional” approach wasn’t getting them anywhere, they turned to their network. “We ultimately got our funding through a personal connection, who set up an informal meeting with a private client group representative.”
If you ask around, you might be surprised to find that you actually know someone—or know someone who knows someone—that can help. Also, consider checking out local entrepreneurship resources. Many towns, counties, and states have them. Sometimes even your alma mater will be able to help. Use all of the resources at your disposal, and don’t be afraid to let people know you are looking for investments.
And, if networking doesn’t work, Ben suggests trying your local credit union, especially if you’ve got a relationship with them. Even if a bank won’t offer assistance, you might find a credit union will.
How one woman used traditional methods to get funding to buy a company
A creative or alternative approach to finding funding isn’t always necessary. For some, traditional methods work just as well and in Deborah Sweeney’s case, bank loans allowed her to buy MyCorporation.com from Intuit.
“I used traditional methods of funding, namely bank loans, for the purchase. With excellent credit and a good history of loan repayments and relationship with the bank (even just on a personal savings level), I was able to obtain loan backing for the purchase,” Deborah says.
Of course, if you’re going to go down this route, you need to have good credit and to start building credit from a young age.
Websites like Kickstarter and other crowdfunding platforms are certainly an option if your credit history isn’t optimal, but if you have had the ability to build good credit, than the old, traditional, tried and true method may be just up your street.
After all, it worked for Deborah!
“We also used this capital to grow the business by investing in additional marketing and human capital for product sales. It proved very effective, as we were able to pay off all loans and now are a debt-free and growing company!”
How a product-based company aced Kickstarter and got funded
“Crowdsourcing is truly supporting the quality redesign of a beloved classic like a cast iron skillet, in much the same way early American pioneers who cooked with those same skillets gathered together to raise communities. It just feels right,” says Mike Whitehead, FINEX founder.
They have maintained their relationship with Kickstarter backers through the platform itself and via such social media platforms as Facebook, Pinterest, Instagram, and YouTube, even running successful contests on Instagram, Facebook, and Pinterest.
If you’ve got a novel idea but want to gauge potential uptake, Kickstarter isn’t a bad place to look to. Just remember that you’re going to have to know what to do with the funding once you get it. No one is going to be there to advise you, and this can be pretty daunting when you’ve promised people a product in exchange for their monetary support.
If you operate on a much smaller scale, I recommend trying new platforms like Patreon.
Other funding options that worked for companies1. Turn to your state
Green House Data, a cloud hosting and data center services company with a focus on sustainability and customer service, suggests looking for state incentives. Depending on your industry, there could be many different incentives, grants, and other state-dispensed funding that you can use to expand. Green House Data used such incentives to open up a new facility and to grow rapidly, experiencing 100 percent year-over-year revenue almost every year since their founding.
2. Enter grant competitions
In 2012, Vernetta Freeney was seeking funding to grow her business. Sh had no collateral for a bank loan and needed money quickly. Fortunately, a LinkedIn connection told her about a Seed Grant competition. She entered and was just one of five total applications, and won $2,000 for her business concept, Fusion Tour. That little boost came at exactly the right time and the money helped Vernetta host 15 tour stops in nine major U.S. cities. Today, she tells people that without that boost at the time she needed it, her business wouldn’t be where it is today.
If you’re stuck for ideas or need money quickly, turn to your connections. LinkedIn is a great place to start. Think of joining industry-specific groups as well to learn more about the types of grants available at your disposal.
3. Look to the government
Margit Brazda Poirier, founder of Grants4Good, tells entrepreneurs that apart from their own platform, which is primarily used to fund nonprofit businesses, other great resources to consider include: your local Small Business Administration, your local Economic Development Council, grants from the Federal Government, and the U.S. Department of Agriculture.